Spinning Off Radio Is A Great Transaction For CBS

Those were the words from CBS Corp’s COO Joe Ianniello Wednesday night on the CBS Q4 earnings call. Ianniello said the new combined radio business will benefit from increased scale, stronger cash flow, and real operational synergies which should drive higher profitability.

CBS shareholders who participate in this deal will hold 72% of the combined company, which Ianniello says will clearly be the best capitalized radio company in the industry. CBS reported CBS Radio revenue grew 1.9% to $328 million during the fourth quarter. The company also said radio operations were discontinued and that it wrote down the value of the stations for accounting purposes.

Back on February 2, CBS entered into an agreement to merge CBS Radio with Entercom. The transaction is expected to be tax-free to CBS Corporation and its stockholders. The new company will have a market cap in excess of $2 billion. CBS says the combined company is expected to generate meaningful cost synergies within 12-18 months after the merger and the transaction should close in the second half of 2017.

Overall, CBS generated $3.52 billion in Q4, which was down from Q4 2015 but profit margins were well above expectations. Revenue was down due to fewer Thursday night NFL games due to election activities. The company reported free cash flow of $1.25 billion and that it had $598 million of cash on hand.